Labor Relations and Collective

Bargaining 9th Edition Carrell Test

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 Copyright ©2010 Pearson Education, Inc.

PART THREE: COST OF LABOR CONTRACTS

CHAPTER 7: COMPENSATION ISSUES

Multiple Choice Questions

1. Which of the following provides for time and one-half pay for any time worked over 40
hours in a week for most workers?

a. Wagner Act
b. Fair Labor Standards Act
c. Davis-Bacon
d. Walsh-Healy Act

(b; Easy)

2. Which of the following would benefit the most from the classification method of job
evaluation?

a. C & V Hardware Store

b. Fuller’s New York Inn
c. Jimmy’s Peanut Processing Plant
d. J.C. Penney

(d; Moderate)

3. A wage survey primarily achieves the compensation objective of:

a. External pay equity.

b. Retaining good employees.
c. Motivating employees.
d. Internal pay equity.

(a; Easy)

4. Which of the following is not true of the piece-rate system?

a. Rewards employee based on # hrs worked.

b. Rewards based on productivity.
c. Reduces labor costs per unit.
d. Helps attract and retain employees.

(a; Moderate)

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5. Management is primarily concerned with the effect a negotiated wage increase will have
on:

a. Board members.
b. Competitive industry position.
c. Stockholders.
d. Supervisors.

(b; Difficult)

6. When a national union chooses one employer to “target” and first negotiates a new
agreement with them, and then demands the same economic gains of others in the industry, it is
known as:

a. Industrial consistency.
b. Stress negotiating.
c. Pattern bargaining.
d. Factor comparison.

(c; Easy)

7. Productivity theory states that the organization’s production is a combination of factors

that includes which of the following?

a. Labor
b. Management
c. Unions
d. Profit levels

(a; Easy)

8. Which of the following is true of the “ability to pay” negotiation theory:

a. Is commonly expressed during wage negotiations.

b. Management will argue that capital investment should receive a share of higher profits.
c. Union negotiations will expect to maintain pay levels not decrease them, when profits
are down.
d. Past profit levels may not be maintained in the future—to pay higher negotiated
wages.

(a; Moderate)

9. Union leaders favor a standard rate of pay for each job (versus a pay range) because:

a. They distrust management merit/performance appraisal systems.

b. A standard pay rate pays senior employees more.
c. A pay range does not allow for merit increase.
d. Supervisors have input in determining individual pay levels.

(a; Easy)

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10. The general purpose for negotiating COLA increases during a multiyear contract is to:

a. Reward merit.
b. Increase wages as profit levels increase.
c. Increase wages as productivity levels increase.
d. Maintain the purchasing power of negotiated wage rates.

(d; Easy)

11. COLA increases in labor agreements are usually tied to increases in the:

a. GNP.
b. CPI.
c. Unemployment rate.
d. Labor force participation rate.

(b; Easy)

12. Union and management negotiations agree that one problem with COLAs is:

a. They are difficult contract clauses to write.

b. They are not needed.
c. Employees take for granted past COLA increases.
d. They are difficult to “explain to employees.”

(c; Easy)

The following information is needed to answer questions 13–15.

GIVEN: 60 employees at $9.50/hr.

30 employees at $9.10/hr.
20 employees at $8.75/hr.
5 employees at $8.00/hr.

Average number of paid hours per year = 1,900.

13. The annual cost of a proposed 5% across the board wage increase would be:

a. $87,400.00.
b. $96,549.68.
c. $100,510.00.
d. $103,787.50.

(c; Moderate)

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14. The average cents-per-hour increase of a 5% across-the-board increase would be:

a. 44¢.
b. 46¢.
c. 48¢.
d. 53¢.

(b; Moderate)

15. The process of determining the financial impact of a contract provision change is referred
to as:

a. Counter.
b. Provision.
c. Surveying.
d. Costing.

(d; Easy)

16. Which of the following would normally be included in a roll-up calculation?

a. COLA maximums.
b. Inflation index.
c. Social Security contribution.
d. Change in base pay.

(c; Easy)

17. The __________ is computed by dividing the cost of the directly increased benefit by the
cost of the wage rate increase.

a. Actuarial wage
b. GNP forecast
c. Roll-up percentage
d. Linear programming formula

(c; Moderate)

18. Which of the following is/are COLA provisions?

a. Pension charges
b. Inflation index
c. Benefit package
d. Piecework

(b; Easy)

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19. Which of the following is used as a means of wage determination, as well as a

motivational technique?

a. Job security provision

b. Pension charges
c. Benefit package
d. Piecework

(d; Easy)

20. Unions have generally made significant wage gains when:

a. They practice decentralized bargaining.

b. Employers’ ability to pay is high due to their discretionary pricing power.
c. Unions are generally fragmented.
d. Industries are decentralized.

(b; Difficult)

21. The following is an example of which type of pay plan?

Number of Piece
pieces rate

100 .025
120 .030
140 .035
160 .045
200 .050

a. Standard piece-rate
b. Falling piece-rate
c. Rising piece-rate
d. Standard hour

(c; Easy)

22. Increased foreign and domestic nonunion competition have forced unions to accept which
of the following new wage adjustment techniques?

a. COLA
b. Equal year deferred wage increase
c. Front-end loaded deferred wage increase
d. Back-end loaded deferred wage increase

(d; Easy)

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23. Why do fewer union contracts in recent years contain COLAs?

a. Labor is more interested in COLAs due to lower inflation rates.

b. Management continues to like COLAs.
c. Foreign and nonunion competition have forced lower negotiated wage increases.
d. Labor is not concerned with job security.

(c; Moderate)

24. Which of the following is not a reason management would prefer a profit-sharing plan to
a COLA?

a. They are always less expensive.

b. They are not tied to the Consumer Price Index.
c. Workers’ pay is linked to their productivity.
d. Workers feel more involved with the success of the company.

(a; Moderate)

25. The pyramiding of overtime refers to:

a. The same hours are eligible for more than one type of premium pay.
b. Working weekends and receiving overtime premium pay.
c. Double-time pay rates.
d. Working more than seven days in a row.

(a; Easy)

26. Which method of deferred income has most increased in use in recent years?

a. Deferred wage rate increases

b. COLAs
c. Lump-sum payments
d. Two-tier pay plans

(c; Easy)

27. Union negotiators have generally agreed to “two-tier” wage systems:

a. Because they are more valuable than COLAs.

b. Because all future union members are better off than under a deferred wage increase.
c. To avoid layoffs or wage cuts.
d. In exchange for grievance arbitration.

(c; Moderate)

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28. Union negotiators are more likely to demand a COLA provision in a contract if:

a. A strike is imminent.
b. Unemployment is high.
c. Negotiations follow a period of high inflation.
d. They are losing union membership.

(c; Easy)

29. Potential morale problems caused by a “two-tier” wage system might be minimized by:

a. Assigning new workers to locations with few or no high-tier employees.

b. Hiring high-tier employees for part-time work.
c. Providing no merges of the two tiers.
d. Allowing higher-tiered employers the first right of refusal.

(a; Moderate)

30. Employees earning over ______________ per year do not receive overtime if their duties
are executive, administrative, or professional.

a. $175,000
b. $95,000
c. $150,000
d. $100,000

(d; Moderate)

31. The productivity theory states:

a. Employees should share in increased profits caused by greater productivity.

b. Leagues produce more than other entities.
c. Team owners should share income with fans of the players.
d. All income should remain with the earner.

(a; Easy)

32. The percentage of contract wage re-openers has decreased by ________ between 1995
and 2004.

a. 30%
b. 1%
c. 7%
d. 75%

(b; Difficult)

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33. A pay incentive system in which employees receive a share of the employer’s profits in
addition to their regular wages is called _____.

a. Benchmark
b. Seniority rights
c. Union security
d. Profit sharing

(d; Easy)

34. Under the FLSA, employers must pay an employee at least a ____________ per hour:

a. Deferred wage rate.

b. Minimum wage
c. Piece-rate.
d. Lump-sum payment.

(b; Easy)

35. In 2003, the Communication Workers of America (CWA) walked off the job over forced
overtime. This strike was against _______________.

a. AT&T
b. Vonage
c. Verizon
d. Sprint

(c; Easy)

True/False Questions

36. Generally, as annual earnings increase, the cost of insurance automatically decreases.

(False; Moderate)

37. If employees perceive that they are unfairly treated by an organization, it is highly likely
that the employees will leave.

(True; Moderate)

38. A wage system in which employees receive a standard rate of pay per unit (regarding
output) is a piece-rate system.

(False; Moderate)

39. Under Title VII, the federal statute governing employee rights, the right to bargain
collectively is limited to issues concerning conditions of employment and excludes wage and
fringe benefits.

(True; Difficult)

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40. Management usually is willing to pay wage rates that reflect the “cost-of-living” by labor
if it is kept in proportion with the cost of capital and equipment.

(False; Moderate)

41. Job evaluation is an attempt to review the employees within a position.

(False; Moderate)

42. The primary problem with productivity theory is that there is no commonly accepted
method of determining labor’s share of increases in productivity.

(True; Easy)

43. In 2004, the U.S. Department of Labor issued new regulations to determine if an
employee is classified as exempt.

(True; Easy)

44. A falling piece rate involves a standard time and rate of production. If the employee
produces less than the standard, the gain is shared between the employer and the employee.

(False; Difficult)

45. A rising piece rate involves a standard time and rate of production. The worker who
increases output by 50% has a greater than proportional increase in hourly earnings.

(True; Moderate)

46. Front-end loading refers to a deferred wage increase with a larger proportion of the total
percentage increase in the second year of the agreement.

(False; Moderate)

47. A back-loaded contract provides a lower wage adjustment in the first year with higher
increases in later years of a multiyear contract.

(True; Easy)

48. Compensation systems whereby management agrees to make two small payments to
employees in addition to their regular wages are termed profit sharing or bonus sharing.

(False; Moderate)

49. The productivity theory states that employees should share in increased profits caused by
greater productivity.

(True; Easy)

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50. Labor negotiators conclude that if a company is experiencing high profits, it can better
pay its employees who have contributed to the good financial conditions. This is called “ability to
pay.”

(True; Easy)

51. Management prefers a system of pay ranges versus a standard rate for each job.

(True; Easy)

52. A back-loaded contract provides a lower wage adjustment in the first year with higher
increases in the later years of a multiyear contract.

(True; Easy)

53. COLA changes normally are made weekly as prices increase.

(False; Easy)

54. The minimum that can occur in the COLA during an agreement is referred to as a “cap.”

(True; Easy)

55. About 55% of the civilian U.S. labor force is covered by a COLA provision.

(False; Easy)

56. The process of determining the financial impact of a contract provision is referred to as
“costing.”

(True; Easy)

57. In existing labor proposals, an employee’s “base” refers to COLA.

(False; Easy)

58. High inflation refers to the cost of employee benefits that increase directly as base wages
increase.

(False; Easy)

59. Wages and benefits are the “meat and potatoes” of collective bargaining.

(True; Easy)

60. A roll-up is one that exists in all departments within an organization.

(False; Easy)

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61. The classification method of job evaluation is primarily designed for large organizations
with one location.

(False; Easy)

62. Unions are entitled to company financial information.

(False; Moderate)

63. Within a Scalon plan, departmental committees of union and management representatives
meet together at least monthly to consider any cost-saving suggestions.

(True; Moderate)

64. Most labor contracts specify that the pyramiding of overtime pay is allowed if earned.

(False; Easy)

65. In 2005, members of the International Association of Machinists and Aerospace Workers
Union went on strike against Boeing.

(True; Easy)

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